Seychelles effort to amend legislations and having monitoring mechanisms in place to oversee the activities of businesses in the financial sector have helped the country to be rated 'largely compliant' by the OECD. (Flickr/401kcalculator) Phto License: (CC BY-SA 2.0)

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(Seychelles News Agency) - Seychelles’ efforts to comply with the widely-recognised Organisation for Economic Co-operation and Development (OECD)’s regulations on the sharing of tax information has led the island nation’s jurisdiction to be rated ‘largely compliant’.

This follows a re-assessment of the island nation’s ‘practical implementation’ of its legal and regulatory framework in place for the exchange of information.

It was in 2013, that the OECD rated Seychelles as non-compliant in two areas in the Global Forum on Transparency and Exchange of Information for Tax Purposes. This was during Phase Two of the Peer Review Group rating process.

Government officials had indicated since October 2013 that decisive action would be taken to address the Peer Review Group’s concerns and push for a re-assessment.

Seychelles has around 140,000 international business companies (IBC) in its offshore sector compared to 650 when it started in 1996.

As a result of its non-compliant rating in 2013, the island nation had to push through amendments to its domestic legislation, including the 1996 International Business Companies Act to bring it in line with international standards. At the beginning of this year Seychelles ratified the multilateral agreement of exchange of information.

The Seychelles Financial Services Authority, FSA as the regulatory body of the financial sector also had to be strengthened, putting in place mechanisms to monitor Corporate Service Providers and International Business Companies, IBCs.

All of these measures are featured in a supplementary review presented to the OECD in June this year, following which the report was reviewed by the Global Forum's 128 member jurisdictions.

In a press interview on Wednesday the Seychelles Minister for Finance, Trade and the Blue Economy Jean Paul Adam said the Global Forum was unanimous in awarding the country the ‘largely compliant status’ at a meeting held in Barbados on October 30, 2015.

“This represents Seychelles' effort to ensure that we attain the required standard… at the same time our financial sector is in a transition phase and our aim is to be able to offer a service to either Seychellois or foreign companies that conform to international best practices,” said Adam.

The offshore business globally is viewed as a high risk sector, with most of the customers not having a presence in the jurisdiction.

Hence, exchange of information in the global financial sector is aimed at having standards in place to enhance the ability of governments to tackle tax evasion and eliminate hiding places for those who seek to evade their taxes.

The possibility of attracting illegal funding obtained through criminal activities, terrorism and money laundering are some of the risks involved.

According to Adam, in straightening out the Seychelles jurisdiction, the Financial Services Authority has in some instances been forced to strike off companies from the register which were not conforming to the standards.

“It was important for us to safeguard the integrity of our financial sector and the country’s economy, and I believe we have done so with minimal impact,” he said.

“There are countries [where financial institutions] have lost their correspondent banking relationships and in some places this has resulted in dramatic consequences… in Seychelles although we have faced this challenge we have been able to maintain the integrity of our jurisdiction.”

Barclays, which was the first commercial bank to set up operations in Seychelles in 1959, ventured into offshore banking in 2004, and together with the Bank of Muscat International Offshore (BMIO) were the main institutions providing offshore banking facilities in the Indian Ocean archipelago.

The high risk factor of offshore banking also impacted BMIO last year. In November 2014, CBS took control of BMIO after the latter’s banking relationship with its foreign correspondent broke down.

While the 'largely compliant' status has been achieved, the Seychelles finance minister has cautioned that there needs to be continued vigilance and that moving forward, legislation will need to be continuously updated and reforms undertaken to ensure that the jurisdiction adheres to the OECD's standards.

Apart from Seychelles; Cyprus and Luxembourg are two other offshore jurisdictions that have attained the 'largely compliant' status after presenting their supplementary report for approval during the Phase 2 reviews.

According to a statement published after the Barbados meeting, the OECD noted that the Global Forum has now completed 215 peer reviews and assigned compliance ratings to 85 jurisdictions that have undergone Phase 2 reviews.